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Ryanair raises guidance again, cautions on next year

Monday, February 2, 2015 - 15:15

Ryanair raised its profit forecast for the third time in as many months on Monday as costs fell and traffic grew, but it cautioned that profit growth will be modest next year as rivals' cheaper fuel push fares down.

PHOTO: BLOOMERG

[DUBLIN] Ryanair raised its profit forecast for the third time in as many months on Monday as costs fell and traffic grew, but it cautioned that profit growth will be modest next year as rivals' cheaper fuel push fares down.

Ryanair, Europe's largest airline by passenger numbers, expects to make a profit of between 840 million euros and 850 million euros (US$949-US$961 million) for the year ending in March, up from a previous forecast of 810 million euros to 830 million euros.

The Irish airline had anticipated annual profit of up to 650 million euros before stellar half year results in November, helped by improvements in its much maligned customer service that have boosted ticket fares and increased passenger numbers.

It said it expects traffic to grow by 25 per cent in the three months to the end of March, up from a prior estimate of 20 per cent, while fares would fall by 6-8 per cent. Unit costs for the full year are likely to fall by five per cent due to lower oil prices.

Ryanair will benefit only slightly from lower jet fuel costs this year as it has hedged 90 per cent of March 2016 fuel needs at US$92 per barrel, about double the current price after benchmark Brent crude plummeted in recent months.

It said on Monday it had hedged 35 percent of full year 2017 at a much lower US$68 per barrel but cautioned shareholders to temper expectations for next year as the short term gain for its rivals who do not hedge out as far may lead to downward pressure on fares in 2015/16.

Ryanair said it also intends to pass on much, if not all, of next year's forecast 8 per cent fall in fuel cost per passenger in the form of lower fares, raising the prospect of intense price competition among European airlines in the coming months. "Some of the weaker guys will get an immediate reprieve but they still have the fundamental other issues in their business,"Ryanair Chief Financial Officer Neil Sorahan told Reuters in a telephone interview. "They still don't have the advantage that we have of a very, very low ex-fuel cost per passenger, some 70 per cent lower than the next closest EasyJet. Hedging is all about certainty." For the three months to December, Ryanair earned 49 million euros after tax, better than a forecast of 30 million euros in a poll of analysts conducted by the company and the 35 million euro loss a year earlier.